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Regulation  of  Foreign  Commerce  by  the 
Interstate  Commerce  Commission 


BY 

WARD  W.  PIERSON 

Assistant  Professor  of  Political  Science,  University  of  Pennsylvania 


A  Thesis  presented  to  the  Faculty  of  the  Graduate  Department  of  the 

University    of    Pennsylvania    in    partial  fulfillment   of  the 

requirements  for  the  Decree  of  Doctor  of  Philosophy 

1908 


REGULATION  OF  FOREIGN  COMMERCE  BY  THE  INTER- 
STATE COMMERCE  COMMISSION 


By  Ward  W.  Pierson, 
Instructor  in  Political  Science,  University  of  Pennsylvania,  Philadelphia. 


It  is  the  purpose  of  this  paper  to  discuss  the  relation  of  the 
Interstate  Commerce  Commission  to  through  export  and  import 
traffic.  To  this  end,  the  subject  matter  is  grouped  under  four 
headings :  the  integration  of  ocean  and  inland  commerce ;  the  pres- 
ent authority  of  the  Interstate  Commerce  Commission  ;  the  conse- 
quences of  incomplete  jurisdiction ;  and  suggested  legislation. 

The  organization  of  through  transportation  systems  has 
changed  the  entire  aspect  of  commerce  within  the  last  three 
decades ;  consequently  an  exposition  of  the  integration  of  ocean  and 
inland  commerce  may  well  precede  the  discussion  of  needed  legisla- 
tion. 

I 

Integration  of  Ocean  and  Inland  Commerce 

The  most  striking  feature  of  the  present  organization  of  com- 
merce is  the  through  character  of  business  and  interrelation  of  the 
trunk  line  railroads  of  the  United  States  with  the  various  trans- 
oceanic carriers.  The  world's  commerce  is  no  longer  carried  on  by 
a  large  number  of  dissociated,  warring  companies.  Competition  has 
given  way  to  cooperation  and  merger.  The  old  system  of  frequent 
transhipment  has  been  replaced  by  through  routes,  through  rates 
and  through  arrangements  which  make  possible  the  remarkable 
celerity  of  present  business  transactions.  The  trunk  line  railroads 
and  the  trans-oceanic  steamship  companies  have  so  splendidly  organ- 
ized their  joint  services  that  the  shipper  may  now  send  his  merchan- 
dise from  an  inland  city  of  one  country  to  a  remote  point  in  a  foreign 
land,  and  have  no  concern  as  to  its  safety ;  for  the  contract  covering 
the  entire  journey  is  or  may  be  closed  the  moment  it  is  given  over 
to  the  initial  carrier. 

To-day,  a  miller  in  Minneapolis  exporting  flour,  can  secure 
his  through  bill  of  lading  from  the  place  of  manufacture  to  ultimate 

(X57) 

444333 


'158  *      *  '  ""'  The  Annals  of  the  American  Academy 

destination  in  Europe,  insure  tlie  flour  under  a  through  certificate 
of  insurance  against  all  risks  of  transportation,  railroad  or  marine, 
from  mill  to  the  foreign  consignee,  sell  his  bill  of  exchange  drawn 
in  the  currency  of  the  country  to  which  the  flour  is  destined,  and 
literally  do  all  the  business  connected  with  the  transaction  upon 
his  own  doorstep  within  the  short  space  of  time  elapsing  between 
the  milling  and  the  final  shipment  of  the  flour.  On  the  day 
the  flour  is  shipped  from  the  mill  the  manufacturer  is  substantially 
free  from  any  further  responsibility  or  liability.  This  system  applies 
not  only  to>  export  flour  but  to  the  export  trade  in  general.  As  a 
practical  illustration  of  this,  a  miller  in  Minneapolis  may  buy  his 
wheat  on  Monday,  grind  it  into  flour  on  Tuesday,  sell  the  flour 
abroad  on  Wednesday,  very  readily  ship  it  on  Thursday,  and  one 
hour  after  the  flour  is  loaded  into  railroad  cars  at  the  mill  he  can 
obtain  his  through  export  bill  of  lading  from  the  mill  door  in  the 
United  States  to  the  warehouse  of  the  buyers  at  foreign  ports  of 
destination. 

Through  Conditions. — Simultaneously  with  the  issuing  of  the 
through  bill  of  lading,  a  certificate  of  insurance  is  issued  by  under- 
writers, which  explicitly  undertakes  to  cover  the  flour  throughout 
the  whole  course  of  transportation.  The  title  to  the  property,  as 
well  as  to  all  the  rights  and  responsibilities  of  the  underwriters  con- 
veyed by  the  certificates  of  insurance,  passes  from  one  bank  to 
another  by  simple  successive  endorsements  on  the  bill  of  exchange, 
and  this  only  because  a  through  bill  of  lading  has  been  issued  there- 
for, which  is  the  recognized  inviolable  title  to  the  merchandise.  The 
western  banker  readily  purchases  of  the  miller  his  exchange  on  the 
foreign  buyer,  for  such  documents  are  the  most  acceptable  form  in 
which  a  remittance  can  be  made  to  foreign  correspondents,  but  the 
banker  would  not  purchase  this  kind  of  exchange  at  all  unless  a 
through  bill  of  lading  was  attached  thereto.  These  shipping  docu- 
ments the  banker  then  sends  to  his  correspondent  in,  say,  Copen- 
hagen, where  they  are  retained  by  the  local  Danish  banker  to  be 
surrendered  when  the  flour  is  ultimately  delivered  to  the  consignee. 
In  the  meantime,  from  the  day  the  flour  was  originally  shipped  until 
it  is  finally  delivered  to  the  consignee,  the  various  manipulations  of 
the  property  are  conducted  by  the  respective  land  and  water  trans- 
portation companies,  without  the  intervention  and  indeed,  substan- 
tially without  the  knowledge  of  the  shipper  or  receiver  of  the  cargo, 


Regulation  of  Foreign  Commerce  159 

the  transporters  having-  assumed  by  the  through  agreement  to 
reheve  the  seller,  bankers  and  buyer  of  all  these  intermediate  factors 
and  conditions. 

Eastbound  Shipments.  Western  exporters  constantly  make 
through  export  contracts  for  the  shipment  of  products  on  through 
bills  of  lading,  with  the  agents  of  the  various  railroads  located 
through  the  West  and  South.  The  steamship  companies  them- 
selves often  do  not  know  the  names  of  the  shippers  or  the  pre- 
cise locality  from  which  the  merchandise  is  forwarded,  until  the 
tissue  copies  (duplicates)  of  the  through  bills  of  lading  as  signed  by 
the  railroad  company's  officers  are  transmitted  to  the  steamship  com- 
pany's office.  Such  a  bill  of  lading  contains  a  large  number  of  stipu- 
lations many  of  which  are  intended  to  frighten  the  unsophisticated. 
Those  made  by  the  inland  carrier  are  first  set  forth.  Then  follow 
the  conditions  submitted  by  the  ocean  carrier.  The  merchandise  to 
be  transported  is  described  and  note  made  of  the  various  marks. 
The  inland  rate  and  the  ocean  rate  are  shown  separately.  Where 
the  agent  of  the  railroad  receives  payment  for  the  through  trans- 
portation he  stamps  on  the  bill  "Freight  Prepaid  to  Destination." 
This  is  a  through  contract  over  a  through  route  at  a  through  rate. 

Through  Freight  Prepaid.  It  constantly  happens  that  the  inland 
and  ocean  freight  are  both  prepaid.  This  presupposes  that  the  mil- 
ler or  provision  packer  has  sold  his  goods  at  a  price  delivered  at 
final  destination  abroad.  The  draft  drawn  and  the  amount  of  insur- 
ance is  correspondingly  increased  as  much  as  the  inland  freight  and 
ocean  freight  together. 

Westbound  Shipinents.  A  similar  statement  might  be  made 
with  respect  to  westbound  traffic  originating  in  Europe  and  destined 
to  the  interior  of  the  United  States.  Frequently  merchandise 
shipped  as  above,  on  through  bills  of  lading,  from,  say,  Hamburg  to 
an  inland  place  of  destination  in  the  United  States,  say  Chicago,  has 
the  entire  ocean  and  inland  freight  prepaid.  A  foreign  seller,  like  an 
American  exporter,  makes  a  price  delivered  at  final  destination, 
including  the  payment  of  entire  through  freight.  In  other  cases, 
where  merchandise  is  shipped  from  abroad  at  a  through  rate  of 
freight  on  a  through  bill  of  lading,  the  connecting  trunk  line  rail- 
road collects  from  the  party  to  whom  it  is  ultimately  delivered  in 
the  interior  of  the  United  States  the  entire  through  charge  for  trans- 
portation, and  reimburses  the  steamship  company  for  the  ocean  car- 


i6o  The  Annah  of  the  American  Academy 

riage.  Through  westbound  merchandise  forwarded  in  bond  from 
the  seaboard,  is  retained  in  the  custody  of  the  United  State  Govern- 
ment until  its  eventual  arrival  at  interior  port  of  destination.  It  is 
then  surrendered  to  the  owner  of  the  property  only  upon  his  deliver- 
ing to  the  collector  of  customs  the  original  through  bill  of  lading 
issued  by  the  steamship  company  at  the  port  of  origin.  Were  it  not 
for  the  through  bill  of  lading,  goods  would  be  retained  at  the  seacoast 
port  of  entry  until  customs  duties  were  paid,  thus  involving  great 
delay  and  expense. 

Insurance.  Contracts  of  insurance  are  daily  made  covering  the 
value  of  the  goods  and  assuring  the  owner  their  safe  transportation 
(inland  and  marine),  and  their  ultimate  delivery.  This  system 
of  through  insurance  is  probably  the  most  comprehensive  system 
of  insurance  extant  to-day,  covering,  as  it  does,  all  character  of 
risks  and  damages  on  merchandise  over  the  inland  carriers,  land 
and  water,  during  transit,  in  the  warehouse,  or  on  shipboard  or 
intermediary  lighters, — the  system  providing  for  the  ultimate  sub- 
rogation of  the  interests  of  the  owners  of  the  property  against  any 
of  the  respective  carriers.  This  is  another  instance  where  all  the 
parties  concerned  in  a  through  shipment  endeavor  to  tie  the  transac- 
tion together  in  its  entirety,  so  that  there  shall  be  no  intermediate 
steps  where  the  one  insurance  or  responsibility  has  ceased  before 
the  other  attaches. 

Through  Bill  of  Lading.  Prior  to  1880,  all  merchandise 
intended  for  export  was  forwarded  by  the  railroads  on  domestic  bills 
of  lading  to  the  seaboard  and  from  there  reforwarded  on  an  ocean 
bill  of  lading.  Often  thirty  or  forty  days  elapsed  before  the  railroad 
had  delivered  the  merchandise  for  transhipment.  An  additional 
sixty  and  sometimes  ninety  days  was  consumed  before  the  shipper 
was  again  in  possession  of  his  capital.  The  export  bill  of  lading  now 
in  use  was  prepared  by  the  Transatlantic  Freight  Conference  in 
1899,  and  approved  and  adopted  by  the  Trunk  Line  Association  and 
affiliated  railroads  April  i,  1901.  It  is  the  outcome  of  many 
years  of  negotiations  between  the  trunk  line  railroads  and  the 
ocean  carriers  to  formulate  and  promulgate  an  instrument  which 
would  be  of  acceptable  and  conclusive  character  to  financiers  and 
underwriters,  the  necessary  intermediaries  in  connection  with 
all  the  export  or  import  traffic  of  the  United  States.  The  object 
was   to    issue    a    negotiable    instrument    which    would    fairly    and 


Rcgiihitiun  of  Foreign  Commerce  i6i 

plainly  designate  the  responsibilities  assumed  and  the  exceptions 
provided  for.  (J)riginally  through  bills  of  lading  were  issued  at 
only  a  few  of  the  large  designated  commercial  centers ;  now  they  are 
obtainable  from  hundreds  of  railroad  officials  throughout  the  United 
States  and  in  all  important  European  centers.  The  railroad  compa- 
nies now  prepare  and  issue  these  through  bills  of  lading  on  which 
eastbound  or  export  traffic  moves,  for  themselves  and  for  the  steam- 
ship companies.  On  the  other  hand  the  steamship  companies  issue 
for  themselves  and  the  trunk  line  railroads  through  bills  of 
lading  on  which  westbound  or  import  traffic  moves  to  the  interior 
centers  of  the  United  States. 

Immigrants.  Immigrants  upon  reaching  the  European  port  of 
departure  book  to  their  final  destination  in  the  interior  of  the  United 
States,  and  are  manifested  through  via  American  trunk  line  rail- 
roads. The  through  passenger  ticket  is  similar  to  the  through  bill 
of  lading..  In  one  case  the  through  freight  is  provided  for, 
and  in  the  other  the  through  fare,  and  in  each  case  there  is  an 
arrangement  between  the  ocean  and  inland  carrier  for  through 
transportation.  There  is  a  large  and  constantly  increasing  traffic 
in  through  emigrants  from  interior  points  in  the  United  States  to 
European  countries.  No  fewer  than  three  transatlantic  steamship 
conferences,  with  headquarters  in  New  York,  with  their  thousands 
of  exclusive  agents  are  engaged  in  conducting  the  immigrant  and 
emigrant  business  under  through  systems  of  tickets,  and  of  orders 
upon  steamship  companies  and  railroads. 

Through  Rates.  As  already  noted,  it  frequently  happens  that 
the  steamship  company  is  without  knowledge  as  to  who  engages 
certain  freight,  where  it  originates,  or  as  to  any  other  circumstance 
relating  to  it  prior  to  the  time  of  arrival  alongside  the  steamer.  In 
such  instances  the  railroad  company  is  serving  as  the  agent  of  the 
steamship  company.  The  Transcontinental  Railway  Freight  Bureau 
has  on  file  with  the  Interstate  Commerce  Commission  (I.  C.  C.  847) 
a  schedule  of  what  are  called  inward-bound  European  through 
rates.  These  through  rates  apply  via  those  steamship  lines  operat- 
ing from  ports  of  clearance  in  conjunction  with  no  fewer  than 
fourteen  American  railroads  (among  others  the  Illinois  Central. 
Sante  Fe  System,  and  the  Union  Pacific),  from  thirty-six  European 
ports  (among  others.  Hamburg,  Copenhagen.  Liverpool)  to  such 
points  as  San  Francisco,  Los  Angeles,  and  Portland.    It  is  specially 


i62  The  Annals  of  the  American  Academy 

stipulated  that  through  rates  will  be  protected  only  when  the  mer- 
chandise is  routed  by  the  general  European  agents  of  the  American 
railways  or  authorized  under  the  system  of  through  bills  of  lading 
and  through  rates  now  in  general  use. 

The  import  committee  of  the  Congress  of  American  Railways 
have  arranged  inland  commodity  rates  on  certain  merchandise  which 
apply  only  to  through  import  traffic.  The  various  steamship  com- 
panies acting  in  concert  issue  on  these  same  commodities  special 
ocean  rates  of  freight  which  they  will  quote  or  permit  to  be  quoted 
only  on  shipments  moving  directly  to  the  interior  of  the  United 
States.  The  inland  and  ocean  carriers  have  thus  made  special  pro- 
vision for  through  foreign  traffic  both  as  to  ocean  and  inland  move- 
ment. In  arriving  at  the  rates  referred  to,  the  American  railways 
take  into  consideration  the  cost  of  the  merchandise  when  landed  at 
the  American  seaboard  as  compared  with  the  appropriate  selling 
price  at  ultimate  destination.  Thus  the  import  inland  rate  on  cer- 
tain designated  commodities  bears  a  definite  relation  to  the  charge 
for  the  ocean  transportation.  It  is  a  proportion  of  a  through  rate. 
Perhaps  no  better  illustration  of  the  complete  integration  of  inland 
and  ocean  commerce  can  be  ofifered  than  by  referring  to  the  Ham- 
burg-American Company's  freight  service  between  the  North  Atlan- 
tic ports  of  the  United  States  and  the  countries  about  the  Baltic. 
Minneapolis  and  Duluth  furnish  great  quantities  of  the  flour,  and 
Omaha  and  Kansas  City  great  quantities  of  the  provisions  which 
enter  into  this  trade.  The  merchandise  from  these  various  sources 
is  moved  first  to  Chicago,  and  from  there  is  carried  eastward  by  the 
trunk  line  railroads  and  lake  vessels  to  be  again  distributed  through 
various  channels  to  the  six  important  United  States  North  Atlantic 
ports.  Immediately  after  arrival  at  these  ports  the  merchandise 
is  transhipped  on  board  a  vessel  of  one  of  the  lines  serving  the 
Baltic.  On  arriving  at  Hamburg.  Bremen,  Hull,  or  Copenhagen,  de- 
pending on  whether  the  Hamburg-American  Packet  Company,  the 
North  German  Lloyd,  the  Wilson  (Hull)  Line,  or  the  Scandinavian- 
American  Line  has  been  the  ocean  vehicle  of  transportation,  a  further 
transhipment  takes  place  on  board  lighters  and  coasters  belonging 
usually  to  the  same  companies  as  the  transoceanic  lines  and  by 
these  latter  vessels  delivery  at  final  destination  is  made  to  consignees 
in  150  or  more  Norwegian,  Swedish  and  Finnish  ports.  Only  the 
vehicle  of  transportation  is  changed.     This  change  in  vehicle  very 


Regulation  of  Foreign  Co)iuncrce  163 

likely  occurs  many  times  within  the  United  States ;  it  may  also  take 
place  after  the  American  seaboard  is  passed.  In  any  event  there 
is  a  through  route,  a  through  rate,  and  a  through  bill  of  lading. 
The  transportation  is  a  through  transportation.  It  is  an  inseparable 
entirety. 

From  the  foregoing,  it  is  clear  that  the  trunk  line  railroads 
and  their  connections,  in  conjunction  with  the  ocean  steamship  com- 
panies, have  assumed  a  through  contract  to  deliver  the  merchandise 
(dangers  and  accidents  of  the  sea  excepted)  to  the  ultimate  port 
of  destination,  and  that  until  so  delivered  the  property  is  covered 
by  inland  or  marine  insurance,  or  by  liability  of  the  common  carrier 
against  substantially  all  risks  of  land  and  water.  Thus  the  shipper 
is  made  absolutely  secure.  Given  perfect  freedom  of  ocean  trans- 
portation in  addition  to  through  conditions  and  perfection  in  trans- 
portation is  reached. 

Unfortunately,  such  conditions  do  not  exist.  But  is  not  the 
sea  a  highway  free  to  all?  Both  the  Supreme  Court  of  the  United 
States  and  the  Interstate  Commerce  Commission^  have  answered 
this  query  in  the  affirmative.  Said  Mr.  Justice  Bradley  in  Railroad 
Company  vs.  Maryland,  21  Wall.  456: 

Page  470.  "Maritime  transportation  requires  no  artificial  roadway.  Nature 
has  prepared  to  hand  that  portion  of  the  instrumentality  employed.  The 
navigable  waters  of  the  earth  are  recognized  public  highways  of  trade  and 
intercourse.     No  franchise  is  needed  to  enable  the  navigator  to  use  them." 

This  opinion  was  handed  down  in  1874,  before  any  of  the 
modern  conditions  which  affect  through  trade  began  to  make  them- 
selves felt.  The  Atlantic  cable  had  barely  been  put  into  successful 
operation,  and  the  through  bill  of  lading  was  substantially  unknown. 
The  words  of  the  learned  judge  are,  however,  as  true  to-day  as 
when  he  first  gave  them  utterance.  No  franchise  is  needed  to 
sail  the  seas,  nor  will  such  a  franchise  ever  be  required.  In  the 
face  of  this  assertion,  it  may  seem  paradoxical,  but  it  is  neverthe- 
less undeniable,  that  on  no  portion  of  the  earth's  surface  are  the 
means  of  transportation  so  completely  controlled  and  monopolized 
as  they  are  on  the  high  seas. 

No  better  example  can  be  cited  than  the  conditions  under  which 

'Cosmopolitan    Shipping   Co.    vs.    Hamburg-American    Packet   Co.,    13    I.    C.    C. 
Rep.   266. 


164  The  Ajiiials  of  the  American  Academy 

is  conducted  the  commerce  of  the  United  States  with  northern 
Europe.  This  great  commerce  is  carried  on  under  agreements 
among  certain  steamship  aggregations.  The  English,  French,  and 
American  transatlantic  steamship  interests,  fearing  destructive  com- 
petition on  the  part  of  the  German  interests,  agreed,  in  1902,  not  to 
transport  for  a  period  of  twenty  years  either  passengers  or  mer- 
chandise by  direct  steamers  to  or  from  northern  European  conti- 
nental ports.  This  agreement  leaves  the  control  of  the  entire  trade 
of  northern  continental  Europe  in  the  hands  of  the  Hamburg-Ameri- 
can Packet  Company  and  its  associates,  which  together  constitute  the 
Baltic  pool.-  Not  only  have  certain  steamship  interests  divided  the 
field,  but  they  have  in  addition  apportioned  traffic.  This  applies 
particularly  to  the  Baltic  trade  of  the  United  States. 

The  sea  itself  is  still  a  highway  free  to  all,  but  when  one 
carrier  controls  100  per  cent  of  the  westbound  and  97  per  cent  of 
the  eastbound  traffic  of  the  six  great  North  Atlantic  ports  of  the 
United  States  with  the  most  important  port  of  continental  Europe 
(Hamburg),  as  was  the  case  in  1906,  there  is  a  monopoly  in  trans- 
portation.^ 

The  export  and  import  trade  of  the  United  States  with  Ger- 
many in  1906  was  $389,000,000.  During  1907  this  trade  increased 
to  $418,000,000.  The  figures  for  the  calendar  year  1907  ($435,- 
000,000)  indicate  that  the  total  for  the  fiscal  year  1908  will  not 
be  far  from  $450,000,000.  This  immense  trade  is  carried  on  almost 
exclusively  by  two  steamship  companies,  the  Hamburg-American 
Packet  Company  and  the  North  German  Lloyd. 

Effect  of  Competition  of  Charter  Tonnage 

But  will  not  the  actual  or  potential  competition  of  charter 
tonnage  minimize  the  evils  which  might  arise  from  steamship 
pools  and  monopolies?  It  must  be  evident  from  the  through  nature 
of  traffic  that  charter  tonnage  and  similar  competition  is  not  only 

*The  Cunard   Line  has  kept   itself  freer   from   pool   agreements   than   have   the 
other  lines. 

^Number  sailings  eastbound  in  1006  from  Boston,  New  York,  I'hiladelphia,  Bjil- 
timore,  Norfolk  and  Newport  News  to  Hamburg : 

Hamburg-American    I'ackct    Company ;    TTnion    I^ine,    owned    and 

operatpd  by   Hamburg-American   racket   Company 108 

other  sailings    •' 

201 


Regulation  of  Foreign  Commerce  165 

a  negligible  factor  but  that  it  is  non-existent  in  so  far  as  merchan- 
dise is  carried  on  through  bills  of  lading.*  In  the  transoceanic 
trade,  charter  tonnage  does  not  and  cannot  offer  an  effective  suc- 
cessful competition  to  line  steamers,  for  it  is  without  the  following 
essential  elements  in  through  transportation : 

1.  To  become  a  successful  competitor  requires — 
(a)      Regular  sailings  from  a  fixed  berth. 

{b)  Facilities  for  granting  through  bills  of  lading,  east  and 
west  bound,  as  well  as  local  bills  of  lading. 

(c)  Terminals,  at  which  traffic  as  it  currently  arrives  can 
be  received  and  cared  for  preparatory  to  tranship- 
ment aboard  ocean  carriers. 

2.  Such  organized  responsibilities  in  connection  with  the  is- 
suing of  bills  of  lading  (local  and  through)  as  would  be  satisfactory 
to  shippers,  bankers,  underwriters,  buyers,  and  others  concerned. 

3.  Chartered  steamers  would  not  be  willing  to  fit  themselves 
with  dunnage  and  other  requirements  necessitated  by  the  miscel- 
laneous character  of  the  general  cargo  to  be  carried,  nor  would 
marine  underwriters,  unless  at  exorbitant  premiums  of  insurance, 
cover  perishable  or  delicate  cargo  by  such  conveyance. 

4.  In  the  transoceanic  trade,  chartered  tonnage  rarely  sup- 
plements the  capacity  of  line  steamers,  except  for  the  single  article 
of  grain,  and  then  only  when  grain  freight  rates  are  much  above  an 
average  figure. 

5.  Under  ordinary  conditions  merchandise  is  now  trans- 
ported from  Chicago  to  the  seaboard  in  fifteen  to  thirty  days. 
It  is  therefore  idle  to  assume  that  either  charter  tonnage  or  "fill 
up"  rates  can  in  any  way  affect  the  transportation  of  commodities 
other  than  in  the  case  of  those  originating  at  the  seaboard. 

As  industries,  such  as  steel  and  iron  have  been  integrated,  so 
also  have  the  transportation  systems  of  the  world  become  welded 
into  a  compact  organization.  This  amalgamation  has  brought  with 
it  great  evils,  but  it  has  also  been  a  great  boon  to  the  commercial 
world.  Twenty-one  years  ago  the  American  people  determined  to 
rectify  the  wrongs  which  carriers  were  in  the  habit  of  visiting  on 
shippers.     To  this  end,  they  passed  an  act  to  regulate  commerce. 

^E.ach  succeeding  year  charter  tonnaRe  becomes  less  and  less  a  factor  in 
world  transportation.  See  Railroad  Gazette,  Vol.  44,  May  8,  1908,  The  Ocean 
Carrier,    J.   Russell    Smith. 


i66  The  Annals  of  the  American  Academy 

When  that  act  was  passed,  the  process  of  amalgamation  had  scarcely 
begun.  The  logical  outcome  of  integration  was  totally  unforeseen. 
No  one  dreamed  that  ocean  commerce  would  be  so  organized  as  to 
form  an  essential  and  inseparable  part  of  inland  commerce.  No 
one  imagined  it  possible  to  construct  the  monster  Mauretania.  No 
one  would  have  prophesied  that  a  single  company  would  in  less  than 
a  quarter  of  a  century  possess  more  tonnage  than  the  over-sea  steam 
tonnage  of  America.  No  one  would  have  risked  his  reputation  by 
asserting  that  within  twenty  years  a  foreign  steamship  company 
would  reach  into  the  storehouses  and  mills  and  factories  of  our 
middle  West.    Yet  such  are  the  conditions  at  present. 

II 

Present  Authority  of  the  Interstate  Commerce  Commission 

The  Interstate  Commerce  Commission  was  created  by  an  act 
of  Congress,  February  4,  1887.^  In  the  Hepburn  Bill,  June  29, 
1906,  entitled  "An  Act  to  Regulate  Commerce,"*^  many  of  the  defects 
in  the  former  act  were  remedied.  The  commission  has  risen  from 
the  capacity  of  an  advisory  board  to  the  dignity  of  a  court  with 
inquisitorial  powers.  It  is  the  purpose  of  this  portion  of  the  paper 
to  discover  the  intent  and  control  which  the  commission  may  exer- 
cise under  this  act  over  through  traflfic  as  described  in  the  foregoing 
pages. 

The  first  section  of  the  law  defines  the  jurisdiction  of  the  com- 
mission.    Eliminating  unimportant  words,  it  is  as   follows: 

That  the  provisions  of  this  act  shall  apply  to  any  corporation  or  any 
person  or  persons  engaged  in  the  transportation  of  oil  or  other  commodity 
.  .  .  and  to  any  common  carriers  engaged  in  the  transportation  of  passen- 
gers or  property  wholly  by  railroad  (or  partly  by  railroad  and  partly  by  water 
when  both  are  used  under  a  common  control,  management,  or  arrangement  for 
a  continuous  carriage  or  shipment)  .  .  .  from  any  place  in  the  United 
States  to  an  adjacent  foreign  country,  or  from  any  place  in  the  United  States 
through  a  foreign  country  to  any  other  place  in  the  United  States,  and  also 
to  the  transportation  in  like  manner  of  property,  shipped  from  any  place 
in  the  United  States  to  a  foreign  country  and  carried  from  sncli  place  to  a 
port  of  transhipment,  or  shipped  from  a  foreign  country  to  any  place  in  the 

B24    S.    L.   379. 

•59  Congress,   Sess.   I,  Cb.  3591. 


Regulation  of  Foreign  Commerce  167 

United  States  and  carried  to  such  place  from  port  of  entry  either  in  the 
United  States  or  an  adjacent  foreign  country:  Provided,  hozvcver.  That  the 
provisions  of  this  act  sliall  not  apply  to  the  transportation  of  passengers  or 
property,  or  to  the  receiving,  delivering,  storage,  or  handling  of  property 
wholly  within  one  state  and  not  shipped  to  or  from  a  foreign  country  or 
to  any  state  or  territory  as  aforesaid. 

The  carriers  affected  by  the  act  are  primarily  railroads.  Under 
certain  circumstances  water  carriers  may  also  come  within  the  act, 
but  this  occurs  only  when  there  is  some  common  control,  manage- 
ment, or  arrangement  existing  between  a  rail  and  a  water  carrier. 
Thus  a  steamship  company  transporting  coal  from  Philadelphia  to 
New  York  is  exempt  from  the  provisions  of  the  act.  Suppose  that 
same  steamship  company  enters  into  a  contract  with  ,the  Reading 
Railroad  Company  to  carry  coal  to  New  York  brought  by  the  rail 
carrier  to  Philadelphia,  then  the  steamship  company,  by  virtue  of  this 
contract,  would  make  itself  amenable  to  the  federal  act. 

The  commerce  affected  falls  into  two  groups :  first,  that  des- 
tined to  or  emanating  from  adjacent  foreign  countries;  second,  that 
carried  on  within  the  United  States.  The  purpose  of  the  phrase, 
"adjacent  foreign  countries,"  is  to  give  the  commission  control  over 
the  commerce  moving  partly  within  and  partly  without  the  United 
States,  in  the  same  manner  and  to  the  same  extent  that  it  exercises 
authority  over  commerce  moving  from  state  to  state.  It  has  been 
decided  by  a  federal  judge,  and  also  in  a  case  before  the  Interstate 
Commerce  Commission  that  "adjacent"  means  contiguous.  In  the 
former,^  Canada  and  Mexico  were  specifically  named  as  being 
adjacent ;  in  the  latter,^  Cuba  is  declared  to  be  not  adjacent,  and** 
"substantial  continuity  of  rails"  is  asserted  to  be  the  essential  feature 
of  the  term  "adjacent." 

The  immense  and  rapidly  growing  commerce  to  foreign  coun- 
tries not  adjacent,  described  in  the  first  part  of  this  paper,  is  with- 
out the  jurisdiction  of  the  Commission,  although  much  of  our 
foreign  commerce  to  non-contiguous  territories  is  forwarded  on 
through  bills  of  lading  from  the  interior  of  the  United  States,  and  is 
carried  by  rail  to  the  seaboard  and  then  transported  on  board  a 

'United    States    vs.    Chicago,    Burlington    and    Qiiincy.    .Tudge    McPlierson    (un- 
reported ) . 

^Lykes  Steamship  Line  r.t.  Commercial  I'nion  et  iiL.  18  I.  C.  C.  Kep.  310. 
^Decided  April  G,   1908. 


i68  The  Annals  of  the  American  Academy 

steamer,  ultimately  arriving  at  the  port  of  destination  without  the 
intervention  of  the  shipper  or  any  one  on  his  behalf.  In  the  case  of 
the  Cosmopolitan  Shipping  Company  vs.  Hamburg-American 
Packet  Co.  et  al.,  13  I.  C.  C.  266/°  Commissioner  Lane,  speaking 
for  the  commission,  oflfered  four  reasons  for  lack  of  jurisdiction: 

1.  Such  construction  was  given  to  the  act  by  the  Senate  com- 
mittee which  presented  the  original  act  of  1887. 

2.  The  act  itself  elsewhere  (than  in  section  i)  defines  the 
carriers  engaged  in  interstate  commerce  to  which  the  act  was  made 
applicable. 

3.  Such  construction  is  alone  consistent  with  other  provisions 
of  the  act. 

4.  The  decisions  of  the  courts  lean  toward  such  construction, 
(i)   The  chairman  of  the  Senate  committee,  in  presenting  the 

original  act  to  the  Senate  in  the  year  1886,  used  these  words: 

While  the  provisions  of  this  bill  are  made  to  apply  mainly  to  the  regu- 
lation of  interstate  commerce,  in  order  to  regulate  such  commerce  fairly  and 
effectively  it  has  been  deemed  necessary  to  extend  its  application  also  to  cer- 
tain classes  of  foreign  commerce  which  are  intimately  intermingled  with 
interstate  commerce,  such  as  shipments  between  the  United  States  and  adja- 
cent countries  by  railroad,  and  the  transportation  by  railroad  of  shipments 
between  points  in  the  United  States  and  ports  of  transhipment  or  of  entry 
when  such  shipments  are  destined  to  or  received  from  a  foreign  country  on 
through  bills  of  lading. 

(2)  The  act  of  1887  authorized  and  provided  a  method  of 
procedure  whereby  the  enforcement  of  the  provisions  of  section  6, 
touching  the  filing  of  tariffs,  might  be  secured  in  the  following 
words : 

And  the  said  commissioners,  as  complainants,  may  also  apply  in  any 
such  circuit  court  of  the  United  States  for  a  writ  of  injunction  against  such 
common  carrier,  to  restrain  such  common  carrier  from  receiving  or  trans- 
porting property  among  the  several  states  and  territories  of  the  United  States, 
or  between  the  United  States  and  adjacent  foreign  countries,  or  between 
ports  of  transhipment  and  of  entry  and  the  several  states  and  territories 
of  the  United  States,  as  mentioned  in  the  first  section  of  the  act,  until  such 
common  carrier  shall  have  complied  with  the  aforesaid  provisions  of  this 
section  of  this  act. 

"Decided  March  9,  1908. 


Regulation  of  Foreign  Commerce  169 

The  wording  of  section  i  as  to  foreign  commerce  remains  to- 
day as  it  was  in  1887.  The  act  of  1906  left  out  section  6.  But,  said 
the  Commission,  through  Commissioner  Lane,  page  273 :  "The  omis- 
sion of  this  provision,  therefore,  we  do  not  take  as  indicating  that 
thereby  any  extension  of  the  jurisdiction  of  the  Commission  was 
intended." 

(3)  If  it  had  been  the  intention  of  Congress  to  give  the  Com- 
mission jurisdiction  over  water  carriers  transporting  foreign  com- 
merce, it  might  be  expected  that  adequate  machinery  for  law  en- 
forcement would  have  been  provided.  In  Commissioner  Lane's 
opinion  the  following  appears : 

Page  274,  "We  look  in  vain,  however,  through  the  many  provisions  of 
this  statute  for  the  slightest  recognition  of  such  carriers  or  of  the  traffic 
which  they  handle.  No  machinery  has  been  set  up  in  the  act  by  which  its 
provisions  can   be  enforced  as  to  transatlantic  steamship  Hnes." 

(4)  The  belief  held  by  many,  that  the  jurisdiction  of  the  com- 
mission was  co-extensive  with  the  commerce  of  the  United  Stares, 
was  based  largely  upon  the  language  of  the  court  in  the  Texas  and 
Pacific  case,  162  U.  S.  197.  After  quoting  the  words  of  the  earlier 
act.  which  are  identical  with  those  of  the  present  act,  beginning 
with  the  words,  "  .  .  .  .  carriage  to  such  place  from  a  port  of  entry 
either  in  the  United  States  or  an  adjacent  foreign  country,"  the 
learned  judge  in  handing  down  the  opinion  of  the  court  said : 

Page  312,  "It  would  be  difficult  to  use  language  more  unmistakably  sig- 
nifying that  Congress  had  in  view  the  whole  field  of  commerce  (excepting 
commerce  wholly  within  a  state)  as  well  that  between  the  states  and  terri- 
tories as  that  going  or  coming  from  foreign  countries." 

The  Supreme  Court  never  intended  that  broad  construction 
which  these  words  seem  to  convey.  Judge  Sanborn  when  called 
upon  to  interpret  section  i  of  the  Act  to  Regulate  Commerce,  in  the 
case  of  United  States  vs.  Colorado  and  Northwestern  R.  R.  Co.,"^ 
referring  to  the  Texas  and  Pacific  case,  said : 

Page  329,  "The  statement  that  Congress  had  in  view  the  whole  field  of 
interstate  commerce  when  it  passed  this  act  is  far  from  an  assertion,  and 
could  never  have  been  intended  to  be  a  declaration  that  Congress  had  regu- 
lated, or  had  intended  by  that  act  to  regulate,  every  carrier  engaged  in  inter- 
state commerce  within  its  regulating  power,  for  that  was  obviously  not  the 
fact." 

«a  157  Fed.  321. 


170  The  Annals  of  the  American  Academy 

In  the  dissenting  opinion  in  the  Texas  and  Pacific  case  of  ^Ir. 
Justice  Harlan,  with  whom  concurred  Mr.  Justice  Brown,  is  to  be 
found  a  comprehensive  statement  as  to  the  Hmitations  placed  on  the 
authority  which  may  be  exercised  by  the  commission.  Referring 
to  section  i  of  the  Act  to  Regulate  Commerce,  he  said : 

Page  245.  "From  this  section  it  is  clear  that  the  Texas  and  Pacific  Rail- 
way Company  is,  and  that  the  ocean  lines  connecting  with  that  company  are 
not,  subject  to  the  provisions  of  the  act." 

The  first  direct  and  final  exposition  of  the  jurisdiction  of  the 
commission  is  to  be  found  in  Commissioner  Lane's  opinion  in  the 
Cosmopolitan  case : 

Page  279,  "Therefore  from  the  language  of  the  act  itself  and  the  evi- 
dent purpose  of  Congress  in  passing  the  act  and  the  decisions  of  the  courts, 
meager  and  unsatisfactory  as  they  are,  we  are  inevitably  drawn  to  the  con- 
clusion that  this  commission  has  no  jurisdiction  over  the  transatlantic  steam- 
ship lines  herein  involved,  even  though  they  may  be  parties  to  a  through 
arrangement  for  a  continuous  transportation  in  connection  with  a  railroad 
within  the  United  States.  On  foreign  commerce  to  a  non-adjacent  country 
the  jurisdiction  of  this  commission  over  carriers  therein  engaged  ends  at  the 
seaboard." 

While  the  commission  has  emphatically  stated  that  it  is  with- 
out jurisdiction  over  any  water-borne  commerce  with  foreign  na- 
tions other  than  those  adjacent,  it  has  asserted  with  equal  emphasis 
its  complete  authority  over  the  entire  inland  portion  of  the  through 
transportation  of  merchandise  destined  to  foreign  ports.  Tliis 
jurisdictional  right  over  so  much  of  the  carriage  as  may  be  inland 
is  based  on  that  portion  of  section  i  of  the  act  which  provides  as 
follows :  The  act  applies  ".  .  .  .  to  the  transportation  in  like  manner 
of  property  shipped  from  any  place  in  the  United  States  to  a 
foreign  country  and  carried  from  such  place  to  a  port  of  trans- 
shipment   " 

It  is  immaterial  whether  the  merchandise  transported  origi- 
nates in  the  state  wherein  is  situated  the  port  of  export,  or  whether 
the  merchandise  has  already  crossed  a  state  line ;  that  the  merchan- 
dise in  question  is  destined  to  a  foreign  country  is  sufficient  to  give 
the  commission  jurisdiction.  Machinery  moving  from  Syracuse  to 
New  York  City  upon  through  billing  to  a  European  point  comes 


Regulation  of  Foreign  Commerce  171 

ander  the  control  of  the  federal  authority  rather  than  state  authority, 
because  it  is  foreign  commerce.  Such  merchandise  is  within  the 
jurisdiction  of  the  commission  from  the  time  it  starts  on  its  initial 
movement,  until  the  moment  it  is  transhipped  on  board  the  ocean 
carrier;  then  it  passes  out  of  the  purview  of  the  commission.  On 
this  point  the  commission  has  expressed  itself  in  unequivocal  terms. 
In  the  Cosmopolitan  case,  Commissioner  Lane  said : 

Page  281,  "The  federal  government  has  said  that  this  commission  shall 
exercise  jurisdiction  over  the  inland  portion  of  the  haul,  either  to  or  from 
the  foreign  country."  .  .  .  "This  ruling  is  the  only  one  which  is  con- 
sistent with  what  seems  to  be  the  policy  of  the  law,  viz;  that  while  restric- 
tion and  control  are  essential  as  to  inland  carriers  of  foreign  commerce,  the 
ocean  carriers  of  such  commerce  should  remain  unrestricted  and  free." 

Just  one  week  had  elapsed  after  this  decision  was  reached,  when, 
on  March  16,  1908,  Mr.  Justice  Day,  in  handing  down  the  opinion 
of  the  Supreme  Court  in  the  case  of  Armour  Packing  Company  vs. 
United  States,  209  U.  S.  56,  confirmed  the  correctness  of  the  posi- 
tion taken  by  the  commission.  At  page  78  of  the  opinion  appears 
the  following: 

We  think  the  language  of  the  statute,  read  in  the  light  of  the  manifest 
purpose  of  its  passage,  shows  the  intent  of  Congress  to  bring  interstate  com- 
merce within  the  control  of  the  provisions  of  the  law  up  to  the  time  of 
ocean  shipment. 

Thus  the  extent  of  the  jurisdiction  of  the  Commission  with  re- 
spect to  foreign  commerce  is  at  last  clearly  defined.  The  commis- 
sion has  neither  control  over  the  merchandise  after  transhipment 
takes  place,  nor  jurisdiction  over  the  transoceanic  carrier.  Its 
authority  terminates  at  the  seaboard.  This  conclusion  was  reached 
almost  simultaneously  by  the  Interstate  Commerce  Commission,  by 
the  Circuit  Court  of  Appeals,  and  by  the  Supreme  Court  of  the 
United  States. 

Ill 
Consequences  of  Incomplete  Jurisdiction 

From  the  decisions  cited  in  Part  II  of  this  paper,  it  is  evident 
that  Congress  must  have  intended  that  ocean  commerce  should  be 
free  from  any  restrictions  whatsoever  as  to  rebates,  publicity,  main- 


172  The  Annals  of  the  American  Academy 

tenance  of  rates  and  pooling.  The  transoceanic  carriers  may  do 
every  one  of  the  things  which  the  inland  carriers  are  prohibited  from 
doing.  Where  two  millers  ship  flour,  or  two  packing  houses  consign 
provisions  to  a  European  port,  both  pay  the  published  inland  rate 
in  the  negotiation,  but  as  a  general  rule  they  pay  different  ocean 
rates.  The  two  through  rates  enjoyed,  combination  or  joint,  as  the 
case  may  be,  may  result  in  discriminatory  rates  between  shippers, 
or  in  various  preferences  enjoyed  by  one  to  the  disadvantage  of 
the  other.  But  the  transportation  is  a  through  transportation.  The 
contract  is  a  through  contract.    It  is  an  entirety. 

Under  former  conditions,  whenever  a  through  bill  of  lading  was 
involved,  the  steamship  companies  became  partners  with  the  railroads 
in  all  of  the  latter's  evil  practices.  The  indictments  recently  brought 
against  the  Southern  Pacific  Railway  Company  and  the  Pacific  Mail 
Steamship  Company,  for  rebating  on  foreign  traffic,  indicate  that 
such  partnerships  may  be  of  the  present  as  well  as  of  the  past. 
Where  two  carriers  are  engaged  in  performing  parts  of  the  same 
service,  no  matter  with  how  painstaking  a  care  enforcement  of 
the  law  is  sought  against  one,  if  the  other  party  to  the  arrange- 
ment is  permitted  to  remain  without  supervision  an  invitation 
is  thereby  held  out  to  continue  the  very  evil  it  was  intended  by  the 
law  to  suppress.  The  indivisible  nature  of  present  through  trans- 
portation makes  it  impossible  to  apply  one  set  of  rules  to  one  part 
of  that  transportation,  and  another  set  of  rules  to  another  part  of 
it.  The  inland  carrier  may  be  an  innocent  or  guilty  accessory  to 
the  unfair  dealings ;  it  may  be  an  unwilling  partner  to  discrim- 
inations between  persons,  or  between  places :  but  in  either  event, 
under  the  present  law  the  ocean  carrier  goes  free.  And  unless  the 
inland  carrier  may  be  brought  to  book,  as  was  suggested  by  Com- 
missioner Lane  in  the  Cosmopolitan  Case,  the  Commission  is  pow- 
erless to  afford  relief. 

Under  the  present  ruling,  ocean  commerce  is  without  the  juris- 
diction of  the  Commission  more  fully  than  intrastate  commerce  is 
without  the  jurisdiction  of  the  Commission. 

On  the  supposition  that  certain  ocean  rates  are  liable  to 
fluctuate,  a  low  ocean  rate  may  be  quoted  to  a  favored  shipper  in 
return  for  large  inland  shipments,  just  as  a  low  intrastate  rate  may 
be  offered  as  a  special  inducement  for  interstate  shipments.  The 
Commission  is  thus  placed  in  the  position  of  endeavoring  to  compel 


Regulation  of  Foreign  Commerce  173 

one  of  the  partners  to  a  through  contract  to  obey  the  law,  while 
it  is  forced  by  a  deficiency  in  the  same  law  to  ignore  rebating,  dis- 
criminations, and  other  reprehensible  practices  of  the  other  part- 
ner— the  very  thing  it  was  intended  to  prohibit. 

The  Interstate  Commerce  Commission  is  the  guardian  of 
American  Commerce.  Its  mission  is  to  prevent  discrimination,  to 
give  to  great  and  small,  to  the  giant  corporation  and  the  humblest 
shipper,  a  fair  chance  in  matters  of  transportation.  But  under  pres- 
ent conditions,  steamship  pools  largely  dictate  the  rates,  the  line, 
the  route,  the  method  and  every  other  condition  of  traffic  to  which 
the  American  producer,  manufacturer,  or  shipper  must  submit,  if 
he  desires  to  introduce  his  merchandise  to  foreign  consumers  in 
other  than  adjacent  foreign  countries.  What  possible  difference 
can  there  be  from  the  shipper's  standpoint  whether  the  discrimina- 
tion or  preference  be  suffered  at  the  hands  of  a  railroad,  or  at  the 
hands  of  a  steamship  company? 

The  Interstate  Commerce  Commission  is  also  a  special  com- 
mittee of  Congress  invested  with  inquisitorial  powers,  created  for 
the  purpose  of  collecting  data  by  which  Congress  may  be  guided  in 
the  preparation  and  enactment  of  appropriate  commercial  legislation. 
Congress  may  call  upon  it  for  expert  information  concerning  only 
those  carriers  which  are  within  the  meaning  of  the  act.  But  Congress 
having  failed  to  give  the  Commission  authority  over  ocean  carriers 
is  unable  to  avail  itself  of  the  splendid  ability  of  a  highly  trained 
body  when  inquiry  is  made  concerning  the  conditions  of  trans- 
oceanic trade  and  traffic.  Congress  must  acquire  information  from 
other  sources,  necessarily  less  competent  and  less  reliable.  Legis- 
lation suffers  accordingly. 

Two  points  may  be  cited  as  consequences  of  the  incomplete 
jurisdiction  of  the  Commission : 

First. — Congress  sought  by  law  to  put  shippers  on  an  equal 
basis.  The  act  of  1887  is  without  the  elasticity  so  necessary  to  meet 
changing  conditions  of  trade  and  traffic.  The  abuses  which  the 
activities  of  the  Commission  have  practically  wiped  out  in  the  field 
of  interstate  commerce  have  been  transferred  to  another  field — the 
field  of  interstate-oceanic  commerce.  In  the  latter  field  the 
authority  of  the  Commission  is  too  limited  to  be  effective.  The 
old  evils  are  renewed ;  the  only  change  is  that  the  sufferers  are  a 


174  The  Annals  of  the  American  Academy 

new  group  engaged  in  doing  a  similar  business  but  over  a  larger 
area. 

Second. — Congress,  having  failed  to  give  the  Commission  com- 
plete jurisdiction  over  the  enlarged  business  area,  is  without  what 
would  have  proved  a  most  reliable  and  fertile  source  of  information 
on  which  to  base  legislation.  Instead  of  drawing  on  an  impartial 
source  for  information,  Congress  can  apply  only  to  those  whose 
so-called  vested  interests  may  be  affected.  This  is  made  more 
unfortunate  by  the  fact  that  the  greater  portion  of  our  trans- 
oceanic commerce  is  carried  on  by  interests  not  American.  Biased 
legislation  has  been  the  inevitable  result. 

IV 

Suggested  Legislation 

With  the  growth  of  those  fields  from  which  our  export  mer- 
chandise is  drawn  and  into  which  it  is  transported,  it  is  presum- 
able that  there  should  be  a  corresponding  amplification  of  the  pow- 
ers of  the  Interstate  Commerce  Commission,  not  in  severity  but  in 
breadth  of  scope,  thus  enabling  the  Commission  to  keep  pace  not 
only  with  changing  commercial  conditions,  but  also  with  the  rapid 
commercial  development  of  the  United  States.  Before  any  con- 
structive legislation  can  be  offered  for  consideration,  it  must  be 
established  to  a  certainty  that  it  is  both  possible  and  practicable  to 
give  the  Commission  control  over  the  ocean  portion  of  through 
transportation. 

The  relation  of  ocean  carrier  to  railway  in  through  transpor- 
tation is  almost  identical  with  the  relation  of  railway  to  connect- 
ing railway  in  the  same  through  transportation.  For  example, 
there  is  a  conventional  division  of  charges  between  all  the  carriers — 
payment  for  the  entire  transportation  being  made  at  the  point  of 
origin  bv  the  shipper  to  the  carrier  receiving  the  merchandise. 
Subsequently  the  proper  charges  due  to  the  remaining  carriers  upon 
the  route  are  paid  over  to  them  respectively.  That  the  railroads 
and  steamship  companies  regard  each  other  as  portions  of  the 
same  route  is  clearly  indicated  in  the  following  account,  which  shows 
the  method  of  carrying  forward  and  dividing  transportation  charges. 
It  is  to  be  noted  that  the  steamship  company  receives  its  payment 
precisely  in  the  same  manner  as  does  any  railway  carrier  succeed- 
ing the  carrier  at  the  point  of  origin.    There  is  a  conventional  divi- 


Regulation  of  Foreign  Coninherce  175 

Statement  slwzvinff  adj'ustnuvit,  division  and  fi)ial  statement  of  total  through 
freight  (inland  and  ocean  freight)  on  a  shipment  of  250  sacks  Hour  (in 
220  pound  cotton  sacks)  from  Alton,  III.,  U.  S.  A.,  to  Copenhagen,  Den- 
mark. 

Inland  freight 16'/^  cents,   Alton  to   Philadelphia    $90-75 

Ocean   freight 14      cents,    Philadelphia   to   Copenhagen    77  00 

Total  through  freight.  .30V2    cents    per    100   pounds    (weight    of   flour, 

55,000   pounds,   was   prepaid    in   cash    at 

Alton,  III.)   $167.75 

The  earnings  would  be  divided  and  distributed  among  the  transportation 
companies  as  follows : 

$167.75     Alton,  111.,  to  Edwardsville,  III,  2  cents  per  100  pounds, 
Less      11.00         amounting   to    $11.00 

to  be  deducted  from  the  total  amount,  and  the  balance 

$156.75         ($156.75)   paid  to  agent  of  the  connecting  road. 
$167.75     From  Edwardsville,  111.,  to  Continental,  O.,  the  earnings 

Less      36.68        divided  on  basis  of  35.9  per  cent,  a  total  of $25.68 

Total     earnings     on     this     point     ($36.68)     and     balance 

$131.07         ($131.07)  paid  to  the  agent  of  the  next  connecting  road. 

$167.75  Between   Continental,   O.,   and   Buffalo,    N.    Y.,    earnings 

Less      55.18        would  be  based  on  25.88  per  cent,  the  local  earnings $18.50 

The   total   earnings  to  this   point,   $55- 18.     This   amount 

$112.57        would  be   deducted  and  balance   of  charges    ($112.57) 

paid  over  to  the  agent  of  the  next  connecting  road. 
$167.75     Between   Buffalo  and   East   Penn  Junction   the  earnings 
Less      75.67        would   be    o;i   the   basis    of   28.66   per    cent,    the    local 

earnings  being  $20.49 

$92.08     A  total  earnings  up  to  this  point  of  $75.67.     This  would 

be   deducted   from  the   total   amount  and   the   balance, 
$92.08,  paid  to  the  agent  of  the  next  connecting  road. 
$167.75     Between  East  Penn  Junction  and  Philadelphia,  earnings 
Less      90.75        would  be  on  the  basis  of  9.55  per  cent,  local  earnings. .    $6.83 

Philadelphia  terminal  charge    8.25 

$77.00    A  total  of  $15.08.     This   amount,   plus  the  $77.00  ocean 

freight,  would  be  placed  to  the  credit  of  the  agent  of 
the  terminal  road  at  Philadelphia. 
$77.00  The  railroad  agent  in  Philadelphia  would  deduct  the 
Balance.  freight  from  East  Penn  Junction  to  Philadelphia,  and 
the  terminal  charges  at  Philadelphia,  amounting  to- 
gether to  $15.08,  as  per  above,  and  pay  over  to  the 
ocean  carrier  balance  of  the  total  through  freight  and 
charges,  Alton,  111.,  to  Copenhagen,  Denmark   $77.00 

$167.75 


176  The  Annals  of  the  American  Academy 

sion  of  charges  between  all  the  carriers.  Total  payment  for  the 
transportation  is  made  at  the  point  of  origin  and  subsequently  the 
proper  agreed-upon  proportions  are  paid  over. 

The  commerce  clause  of  the  constitution  has  given  Congress 
power  to  regulate  the  foreign  and  interstate  commerce  of  the  United 
States.  No  similar  authority  is  granted  over  intrastate  commerce. 
Nevertheless  the  Supreme  Court  has  said  that  where  an  intrastate 
carrier  receives  merchandise  from  outside  that  state,  and  such  mer- 
chandise is  shipped  under  a  through  bill  of  lading,  and  a  conven- 
tional division  of  charges  is  made,  such  commerce  is  within  the  juris- 
diction of  the  Commission. ^^  If  the  authority  of  the  Commission 
can  thus  be  projected  into  a  state  w^here  Congress  can  have  no  direct 
authority  over  interstate  commerce,  much  more  can  that  authority 
be  projected  over  the  ocean  where  Congress  is  specially  authorized 
to  regulate  commerce  with  foreign  nations.  It  follows  as  by  dem- 
onstration, that  when  ocean  carriers  operate  within  the  United 
States ;  when  they  enter  into  contracts  for  the  carriage  of  through 
freight  on  through  bills  of  lading  from  interior  points  in  the  United 
States  to  ports  of  ultimate  destination ;  w4ien  they  participate  in 
through  rates  and  charges, — then  they  become  a  part  of  a  continuous 
line,  not  by  consolidation,  but  by  arrangement  for  a  continuous  car- 
riage or  shipment.  When  such  conditions  as  these  are  present  it  fol- 
lows that  the  Interstate  Commerce  Commission  could  readily  be 
given  authority  to  exercise  the  same  jurisdiction  over  the  ocean  car- 
rier as  it  now  exercises  over  a  carrier  wholly  within  a  state  acting  in 
a  similar  manner  towards  a  connecting  interstate  carrier.^-  It  is 
legally  possible  to  give  the  Commission  control  over  the  ocean  por- 
tion of  through  transportation. 

Are  there  insurmountable  practical  difficulties  in  the  way  of 
giving  the  Commission  control  over  the  ocean  as  well  as  the  inland 
portion  of  through  traffic  shipments  ?  It  may  be  said  that  to  give  the 
Commission  authority  worthy  of  the  name  will  be  to  interfere  unduly 
wath  the  ships  of  foreign  nations,  and  thus  disturb  international 
comity.  Such  an  assertion  is  without  foundation.  It  is  the  com- 
mon practice  of  all  nations  to  lay  down  firm  and  unequivocal  rules 
with  which  the  ships  of  all  nations  must  comply  before  being  allowed 

"Social  Circle  Case,  162  TT.   S.   1S4. 

^rniis   is  now   the  rule  with   respect  to  the  (Jreat  Lakes   which   are  also   inter- 
national highways.     U.  S.  rs.  Wood,  145  Fed.  405. 


Rcgulatiuii  of  Foreign  Commerce  177 

to  carry  cargo  from  the  ports  of  the  legislating-  country.  Eng- 
land, Germany,  and  other  countries  from  which  emigrants  come 
to  America  make  specific  requirements  as  to  space,  ventilation,  food, 
fire  protection,  etc.,  that  must  be  provided  before  a  vessel  is  per- 
mitted to  depart  with  its  quota  of  emigrants.  This  applies  not 
alone  to  the  vessels  of  the  legislating  country  but  also  to  the  vessels 
of  other  nations. 

The  United  States  government  exercises  absolute  control  over 
the  exportation  of  cattle  from  its  ports, ^■'^  Fifty-nine  regulations, 
applying  to  vessels  no  matter  what  flag  they  may  fly,  provide  among 
many  other  things  minute  details  for  the  feeding  of  the  cattle,  the 
space  and  location  which  they  must  have,  the  places  in  which  food 
must  be  kept,  the  order  of  its  use,  etc.^* 

The  ships  of  foreign  as  well  as  domestic  owners  cannot  clear 
from  our  ports  if  there  is  on  board  a  single  can  of  lard  which  does 
not  bear  the  stamp  of  the  Department  of  Agriculture  stating  that  it 
"is  from  animals  that  were  free  from  disease  and  that  it  has  been 
inspected  and  passed  as  sound  and  wholesome,  as  provided  by  law 
and  regulation  of  the  Department."  The  government  of  the  United 
States  forbids  the  ships  of  foreign  powers  to  sail  unless  the  cat- 
tle on  the  decks  of  their  vessels  have  stanchions  of  a  certain  kind 
of  wood,  of  specified  dimensions,  placed  in  such  and  such  a  manner. 
If  all  these  stipulations  can  be  carried  out  without  a  jar  to  inter- 
national comity,  it  is  certainly  neither  unnatural  nor  abnormal  that 
this  country  should  also  require  that  these  same  commodities  should, 
when  the  vessels  of  any  nation  are  finally  permitted  to  sail,  be  car- 
ried under  conditions  which  do  not  produce  discriminations  within 
our  borders.  This  is  a  necessary  prerequisite  to  safeguard  the  free- 
dom of  intercourse,  prosperity,  and  the  general  welfare.  There 
is,  therefore,  precedent  for  giving  the  Commission  control  over  the 
ocean  portion  of  through  transportation,  and  there  need  be  no  fear 
of  thus  disturbing  international  comity. 

In  order  eiTectively  to  regulate  foreign  commerce  of  the  United 
States  it  is  not  necessary  for  us  to  go  into  foreign  countries  or  in 

"See  Bureau  of  Animal  Industry,  Order  No.  139,  and  acts  of  Congress  approved 
March  3,  1801  :  March  21.',  1808  ;  March  30,  lOOfi. 

"The  minuteness  of  this  control  may  be  discovered  by  referrin,?  to  Regulation 
5fi,  which  provides,  "that  the  inspector  may.  in  case  he  finds  that  any  of  the  fit- 
tings are  worn,  decayed,  or  defective  in  construction  or  appear  to  be  unsound, 
require  the  same  to  be  replaced  before  he  authorizes  the  clearance  of  the  vessel." 


178  The  Annals  of  the  American  Academy 

any  way  trespass  upon  their  sovereignty.  A  foreign  company  may 
make  whatever  agreements  it  may  please  or  do  any  acts  in  its  own 
land,  but  when  it  comes  to  the  doors  of  the  United  States  and  wishes 
to  do  business  with  our  citizens,  Congress  has  the  constitutional 
power  to  require  such  a  company  to  dispossess  itself  of  all  agree- 
ments and  all  practices  that  are  in  conflict  with  either  the  letter  or 
spirit  of  our  laws.  Indeed,  the  transoceanic  carrier  frequently  trans- 
ports merchandise  for  a  long  distance  on  the  waters  of  the  United 
States.  For  example,  merchandise  shipped  from  Chicago  to  Copen- 
hagen via  Philadelphia  must  be  carried  by  the  ocean  steamer  one 
hundred  and  one  miles  down  the  Delaware  River  before  the  vessel 
puts  to  sea ;  or  if  the  merchandise  is  shipped  via  Baltimore,  the  vessel 
must  traverse  more  than  one  hundred  and  sixty  miles  of  waters  be- 
longing to  the  United  States.  Thus  a  monopoly  of  the  ocean  portion 
of  through  transportation,  or  an  ocean  pool,  or  a  discrimination  may 
be  consummated  within  our  gates.  Since  the  United  States  is 
sovereign  over  its  own  waters,  regulation  of  ocean  carriers  can  be 
made  effective,  and  abuses  of  the  sort  described  above  can  be 
eradicated. 

Ocean  carriers  and  inland  carriers  are  inseparable  parts  of 
through  transportation,  and  it  is  an  established  fact  that  gigantic 
pools  and  monopolies  dominate  trade  and  traffic  on  the  high  seas. 
That  there  results  a  large  degree  of  control  over  the  inland  portion 
of  through  transportation  by  those  having  the  mastery  of  the  ocean 
cannot  be  doubted.  It  has  been  demonstrated  that  it  is  not  only 
possible,  but  that  it  is  practicable,  to  give  the  Interstate  Commerce 
Commission  power  to  supervise  the  ocean  portion  of  through  trans- 
portation. To  this  has  been  added  the  power  of  precedent  already 
set.  It  has  been  shown  that  regulation  of  the  ocean  portion  of 
through  transportation  can  be  supported  by  an  effective  sanction. 
Finally,  the  Interstate  Commerce  Commission,  by  virtue  of  its  rela- 
tion to  inland  carriers  is  the  logical  repository  for  any  supervisory 
authority  that  may  be  granted  for  the  purpose  of  regulating  trans- 
oceanic carriers. 

It  is  not  suggested  that  the  Commission  should  be  given  power 
to  refuse  steamship  companies  the  right  of  access  to  the  United 
States.  No  such  power  is  contemplated.  The  exercise  of  such  a 
power  w^ould  never  be  endured  by  our  own  merchants  or  by  foreign 
nations.     But  a  proper  extension  of  authority  over  through  trans- 


Rcgulatiun  of  Foreign  Commerce  179 

portation  would,  in  no  way,  impinge  upon  foreign  sovereignties. 
The  Commission  should  be  given  the  power  to  require  any  steam- 
ship company  of  whatever  nation,  doing  business  within  the  United 
States,  to  deal  fairly  with  American  exporters  and  importers,  and 
with  American  competitors  flying  the  flag  of  the  United  States.  The 
Commission  should  be  given  authority  to  ascertain  to  what  extent 
blame  should  be  attached  to  a  steamship  company  as  w^ell  as  a  rail- 
way company  for  giving  undue  preferences.  The  Commission 
should  be  given  authority  to  forbid  any  steamship  company  to  dis- 
criminate within  the  United  States  between  persons,  places,  and 
things.  The  Commission  should  be  given  authority  to  prevent  the 
fulfillment  of  any  contracts  between  steamship  companies,  the  con- 
summation of  which  would  result  in  the  improper  pooling  of  traffic 
in  the  United  States.  Those  steamship  companies  which  might 
refuse  to  conform  to  the  spirit  and  letter  of  our  Constitution  and 
laws  should  be  refused  the  privilege  to  transact  any  business  beyond 
our  seaboard. 

The  Interstate  Commerce  Commission  ought  to  be  given  prac- 
tically the  same  general  power  over  the  ocean  carrier  with  respect  to 
through  transportation  as  it  now  exercises  over  the  inland  carrier. 
Transoceanic  steamship  companies  forming  part  of  a  through  route 
should  be  required  .to  file  with  the  Interstate  Commerce  Commis- 
sion rates  concurred  in  with  the  trunk  line  railroads  and  associates. 
These  line  tariffs  should  be  accessible  to  anyone  applying  at  any 
steamship  company's  office.  If  the  Commission  were  given  power 
to  compel  the  respective  inland  and  ocean  carriers  to  file  and  con- 
cur in  joint  through  rates  and  follow  the  rates  so  filed,  the  steam- 
ship companies  themselves  would  be  greatly  benefited.  Rates  would 
be  less  susceptible  to  variation,  and  a  desirable  degree  of  stabilitv, 
now  sought  to  be  maintained  by  improper  methods,  legally  accom- 
plished. More  publicity 'of  rates  would  minimize  the  unfair  con- 
ditions under  which  shippers  of  through  merchandise  labor,  and 
tend  to  rectify  other  present  abuses.  Railway  rates  now  filed  and 
published  stand  for  at  least  thirty  days  unless  the  Commission 
issues  an  order  permitting  them  to  be  altered  in  a  less  time.  This 
minimum  period  might  be  changed  to  ten  days  for  through  traffic 
without  greatly  affecting  the  real  purpose  or  beneficial  results  of 
the  law.  As  indicated  heretofore,  such  a  ten-day  period  would  not 
be  unjust  for  through  traffic  as  applied  to  ocean  carriers. 


i8o  The  Annals  of  the  American  Academy 

Steamship  companies  should  be  required  to  file  with  the  Inter- 
state Commerce  Commission  all  contracts  entered  into  between  them- 
selves and  with  the  railways  relative  to  through  transportation  of 
merchandise.  Such  contracts  would  show  whether  certain  ports 
or  places  were  suffering  from  discrimination.  If  discrimination 
were  present  the  improper  contract  could  be  dissolved. 

If  the  Interstate  Commerce  Commission  is  to  accomplish  fully 
the-'wise  purpose  for  which  it  was  created  it  should  be  given  gen- 
eral supervisory  authority  over  steamship  companies  forming  a  part 
of  a  through  rate.  Some  of  the  benefits  flowing  from  wise  super- 
vision which  would  reach  both  the  carriers  and  the  shippers  have 
already  been  indicated.  Benefits  would  at  the  same  time  accrue  to 
various  departments  charged  with  the  administration  of  govern- 
ment. Thus  not  only  would  carriers  and  shippers  be  put  upon  a 
fair  and  equal  basis,  but  a  fertile  source  of  material,  necessarily  in 
the  hands  of  a  supervisory  body,  would  also  be  readily  accessible  on 
which,  among  other  things,  to  base  standards  of  transportation  costs. 

The  first  objection,  and  the  one  advocated  with  greatest 
pertinacity,  offered  to  this  program  is,  that  it  is  impossible  to  file 
with  the  Commission  an  ocean  rate  as  part  of  a  through  rate.  This 
contention  is  based  upon  the  assumption  that  ocean  rates  are  not 
stable,  but  changing  from  hour  to  hour  and  from  day  to  day.  No 
one  will  deny  that  this  contention  is  reasonably  true  as  to  purely 
ocean  commerce.  But  no  one  knows  better  than  a  steamship  man 
how  altogether  specious  is  the  claim  that  through  rates  are  con- 
stantly fluctuating,  and  for  the  following  reasons:  (i)  The  rate 
at  which  much  of  our  through  export  and  import  merchandise 
moves  is  now  fixed  annually  by  contracts  between  ocean  carrier  and 
shipper.  (2)  Furthermore,  as  already  pointed  out,  it  ordinarily 
takes  at  least  from  fifteen  to  thirty  days  to  transport  flour,  provi- 
sions, oil  cake,  etc.,  from  the  point  of  origin  to  the  seaboard.  (3) 
The  plea  of  necessity  of  ofifering  "Fill  up"  rates  to  obtain  cargo  falls 
flat  when  applied  to  through  traffic. 

The  plea  that  it  is  necessary  to  offer  a  low  rate  to  a  large  shipper 
and  a  high  rate  to  a  small  shipper  in  order  to  obtain  merchandise  for 
transportation,  has  been  exploded  so  far  as  railways  are  concerned. 
Equality  of  railroad  rates  to  shippers  is  to-day  recognized  as  an 
accomplished  fact.  Why  not  equality  of  steamship  rates  as  well? 
It  is  possible,  practicable,  and  desirable.     The  railways  do  not  chafe 


Regulation  of  Foreign  Commerce  i8i 

under  the  control  of  the  Interstate  Commerce  Commission.  They 
welcome  the  protection  and  stability  which  obedience  to  the  Act  to 
Regulate  Commerce  affords.  Their  rates  are  open  to  all.  Access 
to  their  services  is  denied  to  none.  If  the  proposed  extension  of  the 
Commission's  power  becomes  an  accomplished  fact,  the  benefits  now 
enjoyed  by  the  railroads  alone  will  then  be  equally  shared  by  the 
transoceanic  carrier.  Transportation  facilities  of  every  sort  will 
be  denied  to  none  and  the  benefits  of  wise  legislation  will  be  made 
permanent. 

The  most  gratifying  result  of  the  commercial  legislation  of 
the  United  States  is  the  fact  that  there  is  now  a  fair  chance  for 
the  inland  producer  and  shipper,  however  great  or  small  he  may 
be.  The  giant  corporation  cannot  now  crush  out  its  humble  rival 
through  the  willing  or  unwilling  connivance  of  the  railway.  Under 
present  conditions  the  giant  corporation  holds  the  same  advantage 
over  the  small  shipper  when  both  are  engaged  in  the  export  trade, 
as  it  did  twenty  years  ago  when  both  were  engaged  only  in  the 
domestic  trade.  Our  laws  should  therefore  be  amended  so  as  to 
bring  about  equality  throughout  the  whole  field  of  our  commerce. 


UNIVERSITY  OF  CALITORNIA  LIBEARY, 

BERKELEY 

THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 

•n««v=  Tint  rpturned  on  time  are  subject  to  a  fine  of 

demand  mfy  be  renewed  if  application  is  made  before 
expiration  of  loan  period. 


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DEC 

1  iJ22 

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33 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


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